UPDATE 1-Japan current account surplus shrinks to smallest in 2014

Reuters Staff

3 Min Read

* Balance of payments at +2.6 trln yen in 2014, down 4th
year
* Hefty income gains more than offset bulging trade deficits
* Falling oil prices help narrow trade gap, widen c/a
surpluses
* Dwindling c/a gains make it harder for Japan to repay debt
(Recasts with 2014 data, adds comments, details)
By Tetsushi Kajimoto
TOKYO, Feb 9 (Reuters) - Japan's current account surplus
shrank for a fourth straight year to its smallest on record in
2014 in a worrying sign a bulging trade deficit is hurting the
balance of payment, complicating Tokyo's efforts to rein in a
massive public debt.
Some analysts, however, expect a reduction in the fuel
import bill amid a collapse in global oil prices could help
narrow a persistent trade gap and boost the surplus on the
current account.
"Trade deficits caused a smaller current account surplus.
But given a declining trend in trade deficits due to cheaper oil
prices, I expect balance of payments to expand this year," said
Koya Miyamae, senior economist at Nikko SMBC Securities.
In 2014, Japan's current account surplus fell 18.8 percent
to 2.6266 trillion yen ($22.10 billion), shrinking for a fourth
straight year, reflecting bulging trade deficits, Ministry of
Finance data showed on Monday.
This was the smallest surplus in comparable data available
from 1985.
The narrowing surplus has raised concerns in some quarters
that a persistent trade deficit may tip the current account into
the red over the medium term.
Such an outcome could see Japan starting to chip away at its
vast pool of domestic savings, increasing the need to rein in
its ballooning public debt which at over twice the size of its
economy is the worst in the developed world.
"It's hard to foresee the future trend of current account
as it is influenced by various factors such as currencies, crude
oil and interest rates," said a finance ministry official.
The trade deficit grew 18.1 percent to a record 10.3637
trillion yen in 2014, the MOF data showed.
The trade deficit was underpinned by record imports, partly
led by Japan's heavy reliance on liquefied natural gas imports
to make up for the shutdown of nuclear plants for safety checks
after the 2011 Fukushima crisis.
Still, a record primary income surplus, which measures
profits from investment abroad, worth 18.0712 trillion yen in
2014, helped offset the trade gap, the data showed.
For December alone, Japan posted a current account surplus
for a sixth straight month, helped by income from overseas
investments and a narrowing trade gap due to a weak yen and
lower oil prices.
The surplus of 187.2 billion yen was below the median
estimate of 358.0 billion yen in a Reuters poll of economists.
It followed a surplus of 433.0 billion yen in November.
($1 = 118.8700 yen)